$11,228 Debt Destroyed! Financial Review – June, 2017
Welcome to the fifth installment of our Monthly Financial Review. I check in to update our financial position at the end of each month. The goal is to show our progress in real-time as we pay down our debt and live on a budget. This report will feature more and more useful information as we perfect our budget and learn what works. We nailed our budget in June, and it definitely felt good to accomplish some big milestones!
So, where were we? If you take a look at our position as of 5/31/17, you’ll see that we had a total of $91,424.34 in debt. Coming off a solid month in May where we paid off $5,161.73 in debt, we were definitely looking to continue our winning streak into June and close out the quarter on a high note. Over the past few months, we have been working hard to increase our income from side-hustles and cutting spending wherever possible. We’re focused on wiping out our credit card debt and remaining car loan within the next two months. We pay off as much as we can afford with each paycheck, before we have a chance to spend any of it.
How we reduced our debt by $11,228.18 in one month!
Before you look at our totals and think “that’s not possible”, let me explain. We had an unplanned cash infusion in June that definitely helped out our situation. But the biggest factor in our debt repayment comes from living on a budget and sticking to the plan. Through this dedicated effort, we’ve increased our net worth by nearly $22,000 since the beginning of 2017!
Budget Living: $5,419.87
June was our best month yet for budget compliance! Our base budget gives us about $4,500 in debt payments, but in June we actually paid over $5,400! This was possible thanks to cutting expenses wherever possible. Our grocery bill was below budget by around $100 thanks to three weeks of not eating out. We didn’t spend much on entertainment, choosing instead to get outside and active for free. We also had over $500 in income from our various side hustles including pet sitting, dog walking, and selling junk around the house. It’s very rewarding to see our sacrifice paying off as we make major progress towards our goals.
Savings Reduction: $3,099.35
We finally completed our banking switch in June by closing our old bank accounts. This allowed us to calculate exactly how much we needed to keep as an emergency fund and dump the excess cash on our debts. Reducing our savings was a leap of faith for us, and shows how truly committed we are to achieving our goals. Many people fail to realize that there is an underlying interest expense to maintaining that extra savings balance when you have debt. Having a bare-bones savings account forces us to communicate more throughout the month to ensure we can afford any upcoming expenses.
Retirement Distribution: $2,708.96 (Net Reduction)
I had a Roth 401k plan at my previous job from before we moved to Colorado which I had been meaning to roll over to my current provider. When I finally got around to calling, I learned that my account had been closed in May and a check for the proceeds, about $4,300, would be mailed to me to either roll over or cash out. I was also provided a breakdown of my contributions and the employer match and accumulated earnings, for tax purposes.
The beauty of Roth accounts is that your contributions are after tax, so any withdrawals of those contributions are tax and penalty-free. Tax is still due on any employer match and the earnings above initial contributions. So I did the math, and estimated the early withdrawal penalty and taxes for the earnings and employer match amounts to be about $275. My $9,500 credit card balance was charging about 17% interest, and the interest cost for the two additional months it would take to pay off was about $275 as well. Of course, this doesn’t take into account the opportunity cost of not having these funds invested, but we decided that the guaranteed return of paying off more debt was a fair trade-off.
We will definitely be increasing our savings and retirement contributions once we clear our debts. So we will make up for this distribution fairly soon.
Grand Total: $11,228.18 in 30 days!
The end result of all this effort is that we were able to eliminate $11,228.18 in debt during June! This brings our debt total down to $80,193.16 as of 6/30/17. Our net worth increased by over $5,000 in June, which shows just how effectively we are using our income. Setting goals and having frequent check-ins has been the key to our continued progress.
2017 Goal Update
We began this journey in January, 2017 with over $107,000 in debt. The progress has been awesome and only fuels our fire to ultimately become debt free. Alyssa’s side-hustle of walking dogs and pet-sitting provides some extra cash to the budget. She is really focused on paying off debt and her car will be paid off by the end of August. I will be able to pay off my remaining credit card balance in August as well. We’re already working on ideas for a milestone celebration after paying off the first $33k within 8 months!
The next step will be to build up savings to prepare for buying our first house in 2018. We hope to accumulate at least $20,000 by the end of 2017, and it will be a challenge to stay disciplined seeing that cash in the bank. We are very excited to approach our first real estate investment and get one step closer to the ultimate goal of retirement.
As I shared previously, our base budget gives us close to $5,000 extra every month to pay toward debt. We will continue to CRUSH IT in the coming months and share our progress along the way!
How are your finances holding up as we cross the halfway point in 2017? What’s the biggest goal you’re still hoping to achieve in the year?